Optimal Inter-Release Time between Sequentially Released Products

Marketers routinely use timing as a segmentation device through sequential product releases. While there has been much theoretical research on the optimal introduction strategy of sequential releases, there is little empirical research on this problem. This paper develops an econometric model to empirically solve the inter-release timing problem: it involves (1) developing and estimating a structural model of consumers' choice for sequentially released products and (2) using the estimates of the structural model to solve for the optimal inter-release time. The empirical application focuses on the motion industry, where we specifically address the issue of the inter-release time between a theatrical movie and its DVD version — a topic of great managerial relevance to Hollywood studios. The results from model estimation and policy analysis yield a number of interesting insights. In particular, we find that, given the consumer preferences and industry cost structure in our sample, the theater-DVD window that maximizes the industry revenue is about 2.5 months for an average movie.